In a bid to provide further impetus to the National Pension System (NPS), the following provisions have been introduced in the Finance Bill 2017 laid down in the Parliament today.
Tax-exemption to partial withdrawal from National Pension System (NPS)
The existing provision of section 10(12A)of the Income Tax Act, 1961 provides that payment from National Pension System (NPS) to a subscriber on closurer of his account or opting out shall be exempt up to 40% of total corpus at the time of withdrawal . The amount utilized for purchase of annuity is also tax exempt. At the time of normal exit, 40% of the total corpus is mandatorily required to be purchased for annuity. The subscriber has the option to use higher amount for purchase of annuity.
In order to provide further relief to the subscriber of NPS, it has been proposed to insert a new clause (12B) in the section 10 of Income Tax Act, 1961 to provide exemption on partial withdrawal not exceeding 25% of the contribution made by an employee in accordance with the terms and conditions specified under Pension Fund Regulatory and Development Authority Act, 2013 and regulations made there under.
This benefit will be effective on partial withdrawal made by the subscriber after 1st April 2017.
Further, Contribution up to 20% of the Gross Income of the Self-employed individual (Individual other than salaried class) will be deductible from the taxable income under Section 80CCD (1) of the Income Tax Act, 1961, as against 10% earlier.
This is with a view to provide parity between a salaried employee and a self-employed.
This benefit will be available on contribution made by the self employed persons on or after 1st April 2017.
This increased limit for tax benefit will help the self-employed individuals, to save taxes on higher contribution in NPS and thereby properly plan for their old age income security.
Additional tax deduction on investment upto Rs. 50000/- under Section 80CCD (1B) will continue to remain the same for all NPS subscribers whether salaried or self-employed.

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The Union Budget 2017 was laid before the Parliament today by the Hon’ble Finance Minister of India. The salient features of Direct Tax proposals are summarised below:

I. Affordable Housing:

1. Three concessions in the scheme of Income Tax exemption for affordable housing:

(a) Area of 30 and 60 Sq.mtr. to be counted as carpet area and not built-up area;
(b) 30 Sq.mtr. only in 4 metropolitan city limits and 60 Sq.mtr. for the rest of the country;
(c) Completion period extended from 3 years to 5 years.

2. Tax on Notional rental income for builders to be calculated only after 1 year from the end of the year in which completion certificate is received.

3. Changes in Capital Gain taxation for immovable properties:

(a) Holding period reduce for computation of long term capital gain from three years to two years
(b) Base year for counting the cost of property shifted from 1.4.1981 to 1.4.2001 for all classes of assets including immovable property.

4. Basket of financial instrument in which capital gain can be invested without payment of tax to be expanded.

5. For joint development agreement, the liability to pay capital gain tax will arise in the year in which project is completed.

6. For Andhra Pradesh capital, land belonging to owners as on 2.6.2014 to be exempted from capital gain if the same is offered under land-pooling mechanism.

II. Measures for stimulating growth:

1. Concessional withholding rate of 5 per cent. for interest received by foreign entities on loans given in India to be continued for another 3 years beyond 30.6.2017.

2. Start-ups to get two relaxations under the scheme of Income Tax holiday given last year.

(a) The condition of continuous holding of 51 per cent. voting rights to be relaxed as long as the original investment of promoter is not diluted.
(b) Exemption available for three years out of any 7 years from the date of establishment instead of 3 out of 5 years

3. The period of carry forward of MAT/AMT credit increased from 10 years to 15 years.

4. The corporate income tax to be reduced from 30% to 25% for companies with turnover upto Rs.50 crore in 2015-16. This will benefit 96% of existing 6.67 lakh companies. This will result into tax saving of 16.67% for these companies.

5. Deduction for provision for NPA of Banks to be increased from to 8.5% instead of 7.5% of profit.

6. In case of NPA of non-scheduled cooperative banks, interest to be recognised as income only when received.

III Promoting Digital Economy:

1. In the presumptive income tax for small traders, income to be taken as 6% of turnover which is received by digital or banking means.

2. Cash expenditure allowable to be reduced to Rs.10,000 from the existing Rs.20,000.

3. Cash transaction of above Rs.3 lakh not to be permitted. The penalty of equal amount to be levied in case of breach.

IV Transparency in Electoral Funding:

1. The cash donation to political parties from one person limited to Rs.2,000/-.

2. Electoral Bond to be introduced for facilitating donation to political parties from explained sources.

3. Political parties to file their return in time limit prescribed in the Income Tax Act.

V. Ease of Doing Business:

1. Domestic transfer pricing to be applied only if one of the two companies enjoys specified profit-linked deduction.

2. The audit limit for business entities opting for presumptive scheme to be increased from Rs.1 crore to Rs.2 crore.

3. Individuals and HUFs not required to keep books of accounts if their turnover is up to Rs.25 lakhs or income is upto Rs.2.5 lakhs.

4. Investment in Category 1 and 2 foreign portfolio investors registered with SEBI to be exempted from provisions of indirect transfer.

5. TDS of 5% not to be deducted for individual insurance agents if they certify their income to be below taxable limit.

6. Professionals in presumptive scheme to pay advance tax only in one instalment in March instead of four.

7. The time limit for revising a tax return reduced to 12 months. Also time limit for completion of scrutiny will be brought down to 12 months from Assessment Year 2019-20 onwards.

VI Personal Income Tax:

1. Personal income tax for people with income in the slab of 2.5 lakh to 5 lakh to be reduced to 5% instead of 10%. This will reduce their tax liability to half while all other tax payers above this slab will also be benefited in terms of lesser tax of Rs.12,500 per individual (revenue loss ofRs.15,500 crores).

2. Surcharge of 10% to be levied on individuals with income between Rs.50 lakhs to Rs.1 crore (revenue gain of Rs.2,700 crore).

VII. Miscellaneous:

1. TCS exemption for state transport corporation in respect of purchase of vehicles.

2. Income of Chief Minister’s relief fund exempt from tax.

3. Penalty on accountant, registered valuer and merchant banker for furnishing incorrect information.

4. In order to ensure timely filing of return and expeditious issue of refund, a fee shall be levied for delay in filing of return.

PIB

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Global brokerage Morgan Stanley said that higher pay commission-related payouts could put pressure on government finances.

Some analysts are hopeful that the government will implement Seventh Pay Commission-related allowance hikes after the Budget 2017, which is scheduled for February 1. The Centre implemented the Seventh Pay Commission (CPC) pay hikes in September 16 and is expected to implement the allowance hikes in March after the state elections, domestic brokerage Religare said in a report. This will boost the income of one crore central government employees and pensioners, the brokerage added.

Another brokerage HSBC Securities says that “about 70 per cent of the Seventh Pay Commission recommendations (i.e. pay and pension) have already been accounted for in the FY17 Budget. The remaining item – the housing allowance – is likely to get implemented in FY18.”

“At worst, if the government is under pressure, this allowance can be pushed to the next year, as was done in the previous pay commissions. The housing allowance does not attract arrears,” HSBC Securities said.

Religare, however, said that implementation of the housing allowance portion of the Seventh Pay Commission as well as GST or Goods and Services Tax is expected to push up average inflation. Another global brokerage Morgan Stanley said that higher pay commission-related payouts could put pressure on government finances. “Trailing higher wage spending and further drain are expected as the government is likely to pay the higher allowances due as part of the Seventh Pay Commission wage hikes,” it said in a report.

The Union Cabinet had in June accepted the recommendation of Justice A K Mathur headed Seventh Pay Commission in respect of the hike in basic pay and pension but its suggestions relating to allowances were referred to a committee. The 7th Pay Commission examined a total of 196 existing allowances and, by way of rationalisation, recommended abolition of 51 allowances and subsuming of 37 allowances.

Source: NDTV

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